As the first of four scheduled repayments to the International Monetary Fund this month falls due, Economist Ray Kinsella suggests that Greece should leave the eurozone, as its punishing repayments and austerity programme demonstrate that democracy is long dead in Europe
THE first of four scheduled repayments for June by Greece to the IMF falls due today. Greece does not have the money to repay these loans. Importantly, repayments to the IMF are senior to all other international obligations, amounting to €330bn, or 180% of GDP, and rising. This means a failure by Greece to repay IMF loans would trigger a default in respect of this wider set of creditors. In the absence of some alchemy or yet another fudge, this means Grexit.
In Ireland, as in other eurozone countries, the reaction to what is happening varies from boredom to exasperation. There is precious little sympathy; much less support. This response is misconceived. It is the product of a revisionism that has more to do with the acceptance of German hegemony across the eurozone than with a balanced appreciation of the deeply flawed macroeconomic and political narrative that is unfolding for Greece and for Europe.
The only “get out” open to Greece (and, even then, a temporary one) short of default, is the release of some €7bn in funds from the current bailout programme. The troika — effectively Germany — insists on Greek capitulation: “This is what you must do first do for these funds to be released.” This means additional austerity, including some €3bn budgetary measures. Greece, driven by its political mandate and its view of what is feasible for a traumatised economy, says: “This is all we can do.” Greece has formulated an alternative programme which, prime minister Alexis Tsipras has said involved additional “painful measures”.
In the chancelleries and cafés of the eurozone, including Temple Bar, the consensus justifying what is unfolding is: They brought all this on themselves. Certainly, Greece made big mistakes — of which the dominant countries were well aware, and which were facilitated by western financial institutions. In any event, that was a different generation.
Another purported justification is: “Well, they have all this terrible public sector stuff, like jobs for life and pensions, — even plans to re-employing low-income cleaners — they can’t be allowed to get away with that.”
Can this be serious? Is France, for example, really in a position to start casting stones at any country, much less a country in the position in which Greece finds itself. Yet people actually buy into this hypocrisy. In Ireland, it is whispered that “Well, we did austerity; they will have to just get on with it.” It would take too long to refute such pernicious nonsense.
The early stages of negotiations were political theatre. The elections of the Tsipras coalition were the first time that deep-seated opposition across the eurozone was given political expression. Greece was the first member of the eurozone to reject austerity as a mode of economic adjustment. The central figures in the negotiations — and finance minister Yanis Varoufakis — were larger-than-life personalities as well as being intellectually able. They brought a colour and a competence that contrasted with the grey-suited technocrats, far removed from the reality of what austerity means: Emigration, repossessions of homes, escalating suicides, triggered by a malign model of shareholder value-driven banks that is still in place.
Then there was the high-profile and intensity of the “negotiations” — which pitted the EU Commission, IMF, and the ECB (supported by the US treasury) against an unstable left-wing coalition in the eurozone’s most debt-burdened country: David v Goliath indeed.
Greece is both illiquid and insolvent. It has a shedload of debt it can never repay. It has a broken-backed economy and a humanitarian crisis. “Reforms” are completely beside the point at this stage. Greece is drowning in the platitudes of its “friends” about remaining in the eurozone while simultaneously being emasculated by the insistence of these same friends that it continue with reforms.
The lengths to which Greece has gone to meet its obligations to date are exceptional. Indeed, they border on the irresponsible — they have, for example, impoverished the funding of all public institutions. Simultaneously, there has been a haemorrhage of private bank deposits — recently some €800m in just two days — the dependence of the banking system on emergency liquidity assistance from the ECB. It’s not the only haemorrhage — exacerbating tens of thousands of young people have left and the long-term unemployment rate is the highest in the eurozone. The syndrome is dependency — exacerbating and it applies to countries as well as individuals.
The whole process of negotiations means little. The outcome is already written into the final ultimatum in the briefing documents of German chancellor Angela Merkel, prepared by finance minister Wolfgang Schäuble.
A recent Bloomberg report points out that, over recent months, Merkel had said little, other than offering platitudes to calm markets, leaving it to Schäuble to insist, with icy clarity, on Germany’s outcome. It hasn’t moved an inch since February’s crisis meetings. His view mirrors hers. And for all her reasoned calmness at press conferences — so different to those of the Greek government — it is well to reflect that, as Bloomberg says, “…in the past she has spooked bond markets and shoved aside prime ministers in her crusade to make the currency union durable”.
Her 2010 decision in Deauville, France, that private creditors would suffer losses in future sovereign bailouts, triggered a two-year selloff that toppled governments and banks across southern Europe. Within weeks of her decision, Ireland had asked the eurozone for a rescue and Portugal, Spain, and Cyprus followed. What is at issue is what possible sense can there be in providing Greece with the remaining funds from the current bailout precisely in order to recycle these funds back to its international creditors. Previously, more than 90% of bailout funds were recycled back to banks.
There is nothing whatever in this whole process for the people of Greece and their economy.
Additional austerity would merely reinforce the recessionary pressures that have impelled Greece into an existential crisis.
The issue is not whether the Greek government are a bunch of political amateurs getting their comeuppance from hardened professionals, living in the real world. That is the mythology.
When your economy has shrunk by a quarter and your unemployment rate is 25% and you have the largest debt burden in the west or when your hospitals have no heating oil and schools have been closed, you might be forgiven for being a trifle upset when the dominant country and economy whose banks lent you money tells you to “tighten your belt” — just a little more, and tell the next generation to shape up.
This stand-off is not about economics. It’s not even about moral hazard — the “if you let Greece away with it, sure they’ll all be at it” argument. It goes deeper. The only gain in imposing more austerity on Greece in the teeth of all that economics has to teach us is to reassert the political hegemony of Germany, at the heart of which is the deeply conflicted doctrine of austerity
.
That is what Tsipras said last weekend in the French newspaper Le Monde, when he argued that the eurozone’s dominant players were by degrees bringing about the “complete abolition of democracy in Europe” and were ushering in a technocratic monstrosity with powers to subjugate states that refuse to accept the “doctrines of extreme neoliberalism”.
“For those countries that refuse to bow to the new authority, the solution will be simple: Harsh punishment,” he wrote. “Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim.
“If some, however, think or want to believe that this decision concerns only Greece, they are making a grave mistake. I would suggest that they reread Hemingway’s masterpiece, For Whom the Bell Tolls. The title resonates what the English poet John Donne said: ‘Ask not for whom the bell tolls, it tolls for thee’.”
We should ask what kind of economics is it that insists that an economy with a debt burden of €330bn and mauled by successive programmes of austerity, is in any shape to absorb further measures. We should ask whether this is really about economics, or a nihilistic insistence that Greece should be made an example of when those responsible for the bad decisions have already slipped anonymously into the past.
We should ask whether we want the type of European community that would impose these measures on a fellow member. We should ask whether Tsipras is right that this signals the end of any lingering aspirations to democracy, even if they’re from an ideology that we do not fully agree.
So, whatever finally emerges this weekend, and however it’s dressed up, ask not for whom the bells tolls, it tolls for all of us who believe in democracy and solidarity and a different kind of economics.
With great respect — Greece should exit. It would do better outside of what the eurozone has become.
Ray Kinsella
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